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Starbucks brings back lemon cake, revising menu as part of growth strategy

After the coffee chain bought gourmet-baking company La Boulange in 2012, it used the acquisition to add fancier pastries to U.S. locations. Now Starbucks is discovering that some customers liked the food better before, prompting another round of retooling.

“We’ve got a few products that we are going to bring back from the old menu,” Troy Alstead, chief operating officer for Seattle-based Starbucks, said in an interview. “Some customers missed a few things.”

Starting this week, the company will begin reverting to selling slices of banana, pumpkin and iced-lemon loaf cake — old favorites — in its U.S. stores. Starbucks will be using new La Boulange recipes and existing suppliers to create food that more closely resembles its previous fare.

Getting the menu right is critical to Starbucks’ U.S. growth strategy. In a saturated coffee market, the company is trying to entice more customers to add a pastry or croissant to their latte orders. Starbucks also faces mounting breakfast competition from fast-food chains: McDonald’s Corp. has been offering pastries at some locations this year, and everyone from Taco Bell to Burger King is trying to boost morning sales.

For Starbucks, the challenge is providing fancier fare than the typical fast-food joint — and yet, not too fancy. Fans of the old Starbucks food have complained that the new pastries are too pricey and small. Since the chain began introducing La Boulange’s line of baked goods across the U.S., customers have taken to Twitter and Yelp to air their grievances.

Questioning loyalty

Jeff Pavia, a 53-year-old Chicago resident, posted a Yelp review saying he was rethinking his loyalty to Starbucks after the chain stopped serving the coffee cake and morning buns that his 82-year-old mother loved.

“She just really prefers the older recipes,” he said over the phone. The servings also are smaller and the prices seem to be higher, he said.

“Feels too fancy,” a customer in Pittsburgh named Chris Lovett posted on Twitter. “I just want a donut now and then.”

Leslie Fireman, a 32-year-old customer in Geneva, Ill., said she has cut her Starbucks visits to once a week, compared with four or five times before the switch to La Boulange. Once a Starbucks double-chocolate brownie addict, she no longer sees the chain as a place to stop in for a snack.

“I’m not a fan of the new line,” she said by phone. “Their product has lost some of that freshness and flavor that it used to have.”

The substitute teacher, who has complained to Starbucks baristas about the issue, said the new croissants taste “a little bit like croissants you might get on an airplane.” The blueberry scones also have fewer blueberries, she said.

Even so, most customer feedback on the bakery food has been “significantly positive,” Alstead said. The latest reworked menu, which will roll out one market at a time, is aimed at winning over the holdouts. At Starbucks’ company-operated stores, 20 percent of sales came from food in its last fiscal year, up from 19 percent the previous two years.

Breakfast items are a good way for Starbucks to get a few extra dollars per customer, through the company hasn’t yet “struck gold with anything,” said Bob Goldin, executive vice president at Chicago-based restaurant research firm Technomic Inc.

“I don’t think they have any sustained momentum in breakfast,” he said in an interview. “They do OK.”

Healthier fare

Though some of Starbucks’ new pastries may be littler than their predecessors, they’re also healthier. La Boulange’s blueberry scone is about 17 percent smaller than the older version and has 70 fewer calories, according to data on the company’s website. A banana-pecan walnut loaf cake is about 9 percent smaller than the old banana-walnut bread and has 90 fewer calories.

Starbucks bought Bay Bread LLC, the owner of La Boulange, for $100 million in 2012 to help it revamp its food lineup. Since then, the French-themed bakery has created almond croissants, spinach pastries and flourless chocolate cookies that baristas typically heat up for customers. Starbucks has said that La Boulange items will be in all U.S. locations by the end of the fiscal year, which lasts through September.

In March, Alstead called the rollout of La Boulange “enormously complex.”

Starbucks’ stock has dropped 5.6 percent this year. The shares climbed 0.9 percent to $74.01 Tuesday in New York.

Alstead, a 22-year veteran of Starbucks, stepped into the role of operating chief in February when CEO Howard Schultz handed off day-to-day management of the company. That means the job of fine-tuning the food strategy will fall to Alstead while Schultz focuses on the company’s mobile technology and e-commerce.

Starbucks has had hits and misses with its food over the years. The company, which first began serving breakfast sandwiches in 2003, revamped the lineup in 2008. In that instance, it was the smell — rather than the taste — that drew complaints. Customers grumbled that food odors were overpowering the aroma of coffee.

Selling more food is part of a strategy to expand beyond coffee into everything from tea to alcohol. Starbucks is adding beer and wine, along with appetizers, to thousands of locations in the U.S. over the next several years. And the company is opening at least 20 more Teavana tea shops this year, expanding a chain it acquired last year. Starbucks, which has more than 11,500 U.S. locations, also has been improving its mobile and rewards programs to help bolster sales in the U.S.

The McDonald's threat

Though Starbucks has expanded into Europe and Asia, the Americas region still accounts for most of its sales. The company got about 74 percent of revenue from cafes in the U.S., Canada and Latin America in its past fiscal year.

Other restaurant chains, meanwhile, are trying to steal some morning business from Starbucks. Some McDonald’s locations in San Diego are testing raspberry and cream-cheese pastries. Taco Bell, owned by Yum! Brands Inc., introduced a breakfast menu last month that includes sausage burritos and waffle tacos.

Starbucks is charging a premium over what’s available at McDonald’s, which sells sandwiches for as little as $1. That could make Starbucks a hard sell for a broader audience, Technomic’s Goldin said.

“It is very hard to compete with the Egg McMuffin,” he said.

For Starbucks regulars, the menu changes take a psychological toll, whether or not they’re an improvement.

“You get kind of used to stuff,” Pavia said. “We’re all creatures of habit to some degree."